FedEx Corporation announced plans to separate its less-than-truckload (LTL) operation into a standalone public company, a decision reflecting growing investor interest in the high-value LTL market. This strategic move will split the country’s largest LTL operation from FedEx’s broader shipping business, enabling both entities to operate independently while collaborating on key initiatives.
The separation comes after months of discussions sparked by analysts and investors advocating for FedEx to capitalize on the $9 billion LTL group’s market potential. LTL carriers, particularly non-union ones like FedEx Freight, have recently attracted higher valuations compared to traditional transportation companies, driving the timing of this decision.
FedEx Freight currently handles an average of 92,000 shipments daily with approximately 30,000 power units from the company’s extensive fleet of over 155,000. CEO Raj Subramaniam emphasized that the separation will allow the freight division to respond more effectively to the unique dynamics of the LTL market while unlocking additional value for stockholders.
The spin-off process is expected to take up to 18 months, during which FedEx Freight will become a fully independent entity under its existing name. To ensure seamless service continuity, the two entities will enter commercial agreements to coordinate customer services and retain strategic collaboration in key areas such as technology, operations, and marketing.
Leading the transition is Claude Russ, former CFO of FedEx Freight and currently the enterprise vice president of finance, alongside Tom Connolly, newly appointed vice president of LTL sales. Connolly, bringing nearly three decades of experience to the role, is tasked with expanding the sales team by more than 300 individuals in preparation for the formal separation.
Despite its past growth, FedEx Freight recently faced challenges. Over the last five years, the LTL division increased its operating margins by more than 10 percentage points, but in the second quarter of fiscal 2025, profits fell significantly. Operating profits dropped from $491 million to $312 million due to declining industrial sector demand and customer price sensitivity. Average daily shipments fell by 8%, and revenue per shipment was down by 4%.
FedEx as a whole also faced financial pressures in the recent quarter, reporting $22 billion in revenue, a slight dip from the previous year. As a result, executives adjusted their fiscal 2025 revenue forecast to flat growth instead of the previously anticipated increase.
Despite these challenges, the announcement of the spin-off had an immediate positive impact on FedEx’s stock. Shares rose nearly 9% to $300 in after-hours trading on December 19, marking their highest level in three months. This surge increased the company’s market capitalization to over $72 billion, reflecting strong investor confidence in the separation strategy.
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